Monday, October 31st, 2011
Schlumberger today announced a service milestone for its HiWAY* flow-channel hydraulic fracturing service. Since its release a year ago, HiWAY has been pumped in nearly 3,000 stages in vertical and horizontal wells in eight countries for more than 30 operators.
“With respect to conventional fracturing methods, the HiWAY service provides improved production and ultimate oil and gas recovery, as well as higher reliability for proppant placement, reduced footprint and increased efficiency,” said Dominique Malard, president, Schlumberger Well Services. “With applications in both horizontal and vertical completions, operators can take full advantage of the improved production and recovery in a wide variety of reservoirs and completion types.”
In the Eagle Ford Shale, South Texas, one operator sought a solution to improve oil and gas production and operational efficiency in a horizontal well. Issues related to the efficient conveyance of bulk materials, such as slick-water treatments that require millions of gallons of water and millions of pounds of proppant per well, posed additional challenges. The operator applied the HiWAY flow-channel fracturing service to address these challenges. The service increased 60-day cumulative oil production by 43% and 60-day cumulative gas production by 61%. Water and proppant consumption were both reduced by 58% and 35% per well, respectively.
The service has been used in horizontal applications in the United States, Canada, Russia, Mexico and Argentina. The HiWAY service can be used for applications such as consolidated rock fracturing treatments, single and multistage oil and gas wells and formation temperatures from 38 to 149 degC [100 to 300 degF].
For more information about the HiWAY flow-channel hydraulic fracturing service, go to www.slb.com/hiway.
Monday, October 31st, 2011
TNK-BP announces that it`s Vice President, Human Resources and Organizational Development, Andrei Yanovsky, has been awarded the Aristos 2011 prize in the “Best Human Resources Director” category for the Company’s highly efficient HR policy.
The prize is organized by the independent Managers Association, which aims to introduce international business standards in Russia. The winners are chosen by the Prize Academy, which includes recognized leaders of the Russian business community, to ensure that the manager’s professional reputation is assessed as objectively as possible, using fair and clear criteria to select the winners.
“People are our Company’s principal asset, and it’s a great honour for me to receive this award, which confirms yet again that we are moving in the right direction. We have recently been paying special attention to developing talent within the Company, to applying new and unorthodox solutions in HR management, to the quality of training provided to technical specialists and addressing the looming “staff shortage”, and of course we’re delighted that our initiatives have struck a chord and received recognition amongst colleagues and society”, said Andrei Yanovsky, Vice President, Human Resources and Organizational Development, at the awards ceremony, which was held on October 26, 2011 in the Moscow International House of Music.
Monday, October 31st, 2011
TNK-BP subsidiaries in Orenburg (OAO Orenburgneft and OOO Buguruslanneft) are planning to complete 70 innovative projects in the region by the end of the year. Application of unique new technologies would make it possible to produce additional 156,000 tons of crude and get an economic effect of RUR 805 million.
Last year, the Orenburg-based subsidiaries of TNK-BP completed 24 innovative projects covering well drilling, subsurface and development, surface infrastructure and wellwork with an incremental production of 76,000 tons.
According to Valery Batrashkin, OAO Orenburgneft General Director, 31 pilot projects are pending completion. “Some of the technologies we piloted may subsequently be rolled out across the whole Company’”, he stressed.
Friday, October 28th, 2011
This has been a most significant year for Victoria Oil & Gas with considerable value added to our assets and extensive work completed at site on our principal projects. At our flagship Logbaba gas and condensate project in Douala, Cameroon we expect to commence production this year. At West Medvezhye, prospective resources are now in excess of 1.4 billion barrels of oil equivalent (“boe”), exceeding the previous estimates by approximately 300 million boe, and including increased oil prospectivity to 670 million bbls. Across the Company, we have increased net reserves by 40% to 52 million boe and net resources by 30% to 1,594 million boe. Shareholders have always supported these investments and it is now the Company’s responsibility to return added value to shareholders.
Review of the Markets
The financial markets remained extremely volatile throughout the period and fears over economic stability have increased further this year. The Eurozone debt crisis, global cut backs and austerity measures have dominated the headlines with gloomy predictions of economic growth in the West for the foreseeable future. In addition, civil unrest in the Arab world and the tsunami in Japan have only served to increase the volatility in the energy markets.
Access to capital markets in this economic climate has been challenging for smaller AIM-listed E&P companies. In this context, I am very pleased that Victoria has been able to continue exploration and development operations apace, securing additional finance of approximately $34 million in the financial period and reducing our Group losses by $1.4 million to $4.7 million.
West Medvezhye, Russia (100% owned)
Whilst the Logbaba project is understandably the focus of attention from investors, we have made great strides in Russia this year. West Medvezhye (“West Med”), strategically located in the Nenetsk region of Siberia with a licence area covering 1,224km2, represents an asset with major hydrocarbon potential which could propel the Company onto a new playing field. It lies just west of the super giant Medvezhye field where over 70 trillion cubic feet of dry gas has been produced. VOG’s wholly- owned subsidiary, ZAO SeverGas-Invest, holds a 20-year licence to develop the huge resource potential.
During the past twelve months, our technical team has commenced conceptual screening and appraisal studies to optimise development of our prospective resource base and develop our discovery, Well 103, with an early production scheme to bring forward initial cash flows. This work is ongoing and I am encouraged that preliminary assessment work on the Well 103 discovery indicates that we can plan for first oil sales in 2015.
In March 2011, the Company commissioned a seismic reprocessing and geological modelling study to be carried out on West Med by an independent Russian geoscience consulting institute, Mineral LLC (“Mineral”). Further to the previous assessment carried out by DeGolyer and MacNaughton in 2006, they were asked to incorporate our new well data, passive seismic and gas tomography results with our existing conventional 2D seismic.
In September this year, we were very pleased to report that Mineral has estimated West Med prospective resources to be in excess of 1.4 billion boe, exceeding the previous assessment by approximately 300 million boe, and including increased oil prospectivity to approximately 670 million barrels of oil. These results are very encouraging indeed. Our team is continuing to investigate the results of the Mineral study, together with the geochemical and passive seismic results, and we expect to submit an application to the Russian authorities requesting approval of our proposed drilling locations for two wells in 2012 very shortly.
Outlook and Other Projects
The traditional sector “packaging” and structural approach offered by companies is, post the financial crisis, being replaced by companies offering cash flow, superior growth potential and diversification of risk.
Following our recent placing for £9.5 million in September 2011, the Company is now well capitalised for an exciting year ahead with cash flows being generated from Logbaba and development plans firming up at West Med.
Victoria now has total recoverable proved and probable reserves of 52 million boe and significant potential, with prospective resources in excess of 1.5 billion boe.
Victoria constantly reviews opportunities to increase the Company’s asset base where we see economic value and synergies with our existing assets or technical and management competencies. We have reviewed a number of targets during the financial period and we have a number of existing business development opportunities both at the asset and corporate level that are currently being appraised by our management team. The Board remains committed to building Victoria into a medium sized, profitable, resource focused company within three years. We believe economies of scale through organic growth and via selected acquisitions where we can demonstrate real added value will facilitate greater returns to shareholders.
The Company is also assessing a number of opportunities in Cameroon where we can leverage our existing relationships and benefit from our existing infrastructure and capabilities. Cameroon is blessed with an abundance of natural resources and we are examining asset opportunities outside the traditional exploration and production sphere where our gas reserves can be a catalyst for other industrial opportunities.
I would like to thank all employees, contractors and advisers of the Company and my fellow Directors for the excellent progress to which everyone has contributed this year. Equally, I would like to thank all Company shareholders for continuing to support Victoria in these challenging markets. I hope you can begin to see the rewards of your confidence very soon.
West Medvezhye, Russia
VOG’s wholly owned subsidiary, ZAO SeverGas-Invest (“SGI”), holds a 20-year Exploitation Licence for West Medvezhye, (“West Med”), covering 1,224km2. West Med is located in one of the most prolific oil and gas producing areas of the world and is adjacent to Gazprom’s giant Medvezhye field that has already produced over 70 trillion cubic feet of gas.
The block is located in the Yamal Peninsula in the Nenets region of Siberia and was independently assessed in 2006 by DeGolyer and MacNaughton (“D&M”) to have total prospective resources of approximately 1.1 billion boe. In total, D&M identified 25 leads and prospects and the Company’s first discovery in West Med, Well 103, was based on a prospect defined by D&M. The discovery has C1 and C2 reserves, independently assessed, under the Russian classification convention of 14.4 million boe as approved by the Russian Ministry of Natural Resources.
During 2010, the second phase of passive seismic and gas tomography surveys were recorded and interpreted throughout the year, identifying direct hydrocarbon indications in six areas, covering a total of 79 km2, according to VOG management and GDR estimates.
Further to these encouraging results, the Company commissioned a seismic reprocessing and geological modeling study to be carried out on West Med by an independent Russian geoscience consulting institute, Mineral LLC (“Mineral”), incorporating the new data sets with the existing conventional 2D seismic. Mineral has prepared structure maps and seismic attributes maps for all of the prospective formations in the West Med block.
These results are being integrated with the Company’s passive seismic, gas tomography and geochemical studies to define/rank leads and prospects and to further assess the 103 discovery. The relevant technical details are currently under review by the technical team within the Company and Blackwatch.
On the basis of their assessment received at the end of August 2011, Mineral has independently estimated West Med prospective resources to be in excess of 1.4 billion boe, exceeding D&M’s previous estimate by approximately 300 million boe, and including increased oil prospectivity to approximately 670 million barrels of oil in the Lower Cretaceous Neocomian- Achimov and Jurassic formations. Further to the Company’s review and assessment of Mineral’s report we will submit an application in November 2011 to the Russian authorities requesting approval of our proposed drilling locations.
Studies have commenced on well design and engineering for the next phase of appraisal and development drilling planned for Q4 2012. The Company is in discussions with international and Russian service companies and has compiled initial budgetary estimates for the wells and drill pads. Future development wells are planned to be drilled in clusters of three to ten to significantly reduce location preparation and access cost. This will have a marked impact on development economics.
Conceptual design work has commenced to establish costs and schedules for oil, gas and condensate production facilities and supporting infrastructure. The gathering and distribution network design and engineering will be phased with facilities design, starting with fast track development of the Well 103 discovery.
There exist several routes for the commercialisation of West Med hydrocarbons. The neighbouring town of Nadym is located 44km away with access by all-weather road. The Chircha railroad station is located within the southwest boundary of the licence and the river port and loading terminal of Old Nadym are located 22km away. In addition, one of Gazprom’s principal gas transmission pipelines in the area runs along the eastern border of the licence.
Initial studies have highlighted that an early production scheme of the Well 103 discovery could involve the sale of small volumes of crude into the local market with prices of US$60 per barrel achievable. This would be followed by full scale oil and gas development for export as the export market is well established in this part of Siberia.
The results of our preliminary development assessment work on the Well 103 discovery indicate achieving first oil sales in 2015, subject to further refinement and screening.
Friday, October 28th, 2011
US$1.9 million cash at bank at 30 September 2011.
Discovered two oilfields at the Krasnoleninsky Project in Western Siberia – one at Well No. 1 and the other at Well No. 2.
Reached a final depth of 2,019 metres at Well A-8 at the Company’s Kazakhstan Project, however since no hydrocarbons were found, it was plugged and abandoned.
Entered into a Share Purchase Agreement to acquire 100% of the shares in Vamaro Investments Limited, which holds licences for geological study of subsoil, prospecting and extraction of oil and gas within the territories of the Yuzhno-Sardakovsky block and the Zapadno-Novomolodezhniy block in the Khanty-Mansiysk Autonomous Region in Western Siberia, Russia.
Entered into a memorandum of understanding to acquire 75% of the Druzhny Project in the Tomsk Region of Western Siberia, Russia.
A$45 million receivable from Nkwe Platinum Limited by 31 December 2011, following varied terms to the Asset Sale Agreement.
Subsequent to the quarter end, appointed Merriman Capital, Inc. to assist with application to list on OTCQX International in New York.
Acquisition of the Vamarov Project – Western Siberia, Russia During August 2011, the Company entered into a Share Purchase Agreement (“Vamaro Agreement”) to acquire 100% of the issued share capital of Vamaro Investments Limited (an entity incorporated in Cyprus) (“Vamaro”) (“Vamaro Acquisition”). Vamaro is the holder of:
(a) 100% of the issued share capital of Yuzhno-Sardakovsoye LLC (an entity incorporated in Russia), which holds a licence for geological study of subsoil, prospecting and extraction of oil and gas within the territory of the Yuzhno-Sardakovsky block in the Khanty-Mansiysk Autonomous Region in Western Siberia, Russia; and
(b) 100% of the issued share capital of Zapadno-Novomolodezhnoye LLC (an entity incorporated in Russia), which holds a licence for geological study of subsoil, prospecting and extraction of oil and gas within the territory of the Zapadno-Novomolodezhniy block in the Khanty-Mansiysk Autonomous Region in Western Siberia, Russia,(together, the “Vamarov Project”).
The Company has studied the data from the Vamarov Project, including an independent assessment of the original oil in place and the volume of remaining recoverable oil, and believes that the Vamarov Project may contain up to 55 mmboe of proved and probable (“2P”) reserves. This internal estimate is based on the original oil in place as estimated by the independent assessment, but uses different recovery factors, which the Company believes are appropriate for production using hydraulic fracturing techniques in the region.
13 wells have been drilled on the Zapadno-Novomolodezhniy block and the Company is currently evaluating wells to work over and bring into production, subject to completion of the Vamaro Acquisition, by the end of December 2011. A communication corridor passes through the northern part of the ZapadnoNovomolodezhniy block and includes pipelines and a hard-surface all-weather road, which can be used throughout the year, and a power transmission line.
8 wells have been drilled on the Yuzhno-Sardakovsky block and commencement of oil production in this block is expected to occur in the first quarter of 2012. The nearest oil pipelines are 16 km from the block and the nearest hard-surface road is 11 km from the block.
Subject to Shareholder approval to be sought at the Company’s General Meeting on 9 November 2011, in consideration for the acquisition of Vamaro the Company has agreed to pay US$3 million in cash and issue 55,000,000 Shares (“Vamarov Consideration Shares”) to the shareholder of Vamaro. In accordance with the terms and conditions of the Vamaro Agreement, the Company will also assume certain liabilities of Vamaro, including US$1 million (payable by 9 November 2011) and a further US$4 million (payable by 27 December 2011).
Settlement of the Vamaro Acquisition is subject to a number of conditions precedent, including due diligence and obtaining regulatory and Shareholder approvals (together, the “Conditions”). Settlement of the Vamaro Acquisition will occur as soon as practicable following satisfaction of the Conditions.
Acquisition of the Druzhny Project – Western Siberia, Russia
During August 2011, the Company entered into a memorandum of understanding to acquire 75% of the issued share capital of OOO VostokNefteGaz (an entity incorporated in Russia) (“VNG”) (“VNG Acquisition”). VNG owns an exploration licence in the Tomsk region of Western Siberia (the “Tomsk Exploration Licence” or the “Druzhny Project”).
In consideration for the VNG Acquisition, the Company agreed to:
(a) issue 6,666,667 Shares (“VNG Consideration Shares”) to the shareholder of VNG; and27 October 2011 – 3 -
(b) fund all of the exploration work necessary to fulfil the minimum work programme as stipulated in the Tomsk Exploration Licence.
Completion of the VNG Acquisition is subject to receipt of shareholder approval to be sought at the Company’s General Meeting on 9 November 2011.
If deposits are discovered, the Company intends to carry out an operational estimate of hydrocarbon reserves and file the estimate for Russian state expert evaluation not later than six months after the production well test date.
The Company plans to meet the requirements of the minimum work programme by carrying out at least 1,000 line km of 2D seismic survey during the winter of 2011/12.
The VNG Consideration Shares will be subject to escrow until the earlier of:
(a) a commercial discovery having been made in the Tomsk Exploration Licence;
(b) VNG having acquired an oil-producing asset in the Tomsk region of Russia; or
(c) a period of five years from the date of settlement of the VNG Acquisition.
With effect from completion of the VNG Acquisition, the Company will be the Operator of VNG.
Krasnoleninsky Project – Western Siberia, Russia
The Company, through its wholly-owned subsidiary IPL Siberia Ltd, owns a 75% equity interest in Souville Investments Ltd (“Souville”). Souville is the 100% legal and beneficial holder of Irtysh-Neft, a Russian company having exploration rights to four blocks in Western Siberia (“Krasnoleninsky Project”). Assuryan Assets Ltd holds the remaining 25% interest in Souville and, by extension, the Krasnoleninsky Project. The four blocks comprising the Krasnoleninsky Project cover a total area of 1,467 km² and are located in the Khanty-Mansiysk Region in Western Siberia, the largest oil-producing region of Russia.
The 1,467 km² area comprising the Company’s four licence blocks has been extensively surveyed by 2,446 line-kilometres of closely-spaced 2D seismic data, which identified more than thirty prospects, including five “superstructures”. Within these superstructures, there are a number of potential reservoirs, ranging in age from Paleozoic to Cretaceous, stacked upon each other, offering the potential of multiple producing zones in a single well. In a report to evaluate the hydrocarbon resource potential dated 12 May 2011, Ryder Scott Company-Canada, an independent oil and gas consultant, estimated the unrisked prospective (undiscovered recoverable) resources of the four blocks at 169 (Low Estimate), 260 (Best Estimate) and 385 (High Estimate) million barrels (1). Based on the undiscovered unrisked resource estimates and scoping type resource economic evaluation reports from Ryder Scott and the oil shows in Well No. 1 and Well No. 2, the Company believes that the Krasnoleninsky Project has significant exploration potential.
In May 2011, drilling at both Well No. 1 and Well No.2 reached the target depths of 2,850 metres and 2,930 metres respectively and oil was found during drilling of both wells. The results of the interpretation of electrical logging of Well No. 1 and Well No. 2 were obtained in June 2011, and the interpretation of the electrical logging indicated that the Bazhenov and Tyumen suites are oil-bearing. In addition, the interpretation of the Palaeozoic suite indicated that the fractured zones in both wells are potentially oil bearing.
During August 2011, the Company discovered an oilfield at Well No. 2. Oil commerciality was established in the J4 formation at the interval between 2,740 metres and 2,745 metres of Well No. 2, from which an unstimulated daily inflow of 6 cubic meters of oil was received. Using the data from this test, the Company has estimated oil flow rates after hydraulic fracturing to be 202 barrels per day (low case), 419 barrels per day (base case), and 508 barrels per day (high case) from this interval only.
Later in August 2011, the Company also discovered an oilfield during testing of Well No. 1. Oil commerciality was established in the J2-3 formation at the interval between 2,647 metres and 2,665.5 metres of Well No. 1, from which an unstimulated daily inflow of 5.5 cubic metres of oil was recorded.
In September 2011, changes were made to the expiry dates and other terms of the four exploration licences, covering the four blocks. The expiry date of all four licences has been extended to 31 December 2015 and the following licence commitments have been added:
1. Licence over block 7: second exploration well to be completed by 31 July 2015 (i.e. in addition to Well No. 1 that has already been drilled);
2. Licence over block 8: second exploration well to be completed by 31 July 2015 (i.e. in addition to Well No. 2 that has already been drilled);
3. Licence over block 9: second dependent exploration well to be completed by 31 July 2015 (i.e. dependent on the successful outcome of the first exploration well); and
4. Licence over block 10: second dependent exploration well to be completed by 31 July 2015 (i.e. dependent on the successful outcome of the first exploration well).
During October 2011, the Company completed the testing programme at Well No. 1 and Well No. 2.
The Company currently plans to conduct a stimulation programme in these two wells in January 2012 and commence oil production thereafter, and intends to issue a reserve report for the Krasnoleninsky Project in accordance with the industry standard SPE-PRMS standards by the end of December 2011.
The current approved work program requires the drilling of two wells on the Krasnoleninsky blocks by 30 June 2012 and the drilling of two additional wells by 30 December 2012 (“Current Work Program”). The Company satisfied the first part of this requirement by drilling Wells No. 1 and No. 2 during 2011 and plans to satisfy the second part of the Current Work Program by drilling Wells No. 3 and No. 4 in licence blocks 9 and 10 respectively during the first half of 2012.
Kazakhstan Project – Republic of Kazakhstan
The Company, through its wholly owned subsidiary, North Caspian Petroleum Ltd operates and owns a 50% interest in subsoil use rights for the exploration of hydrocarbons in an early stage project in Kazakhstan (“Alakol Licence Area” or “Kazakhstan Project”). The remaining 50% is owned by Remas Corporation LLP, a privately owned Kazakhstan company.
The Alakol Licence Area is located in eastern Kazakhstan and borders the western boundary of the People’s Republic of China. The main target reservoirs in the Alakol basin are carbonates or sandstones of Paleozoic age occurring at depths ranging between 1,600 and 3,500 metres. The Alakol basin is considered to be similar to the Junggar and Zaisan basins, which are both proven oil-containing basins, across the border in China.
Artesian wells in the area are associated with oil seeps and films of oil, proving the Alakol Basin has generated hydrocarbons. Seismic data indicates that potential Jurassic and Triassic reservoirs are present as stratigraphic traps on the flanks of Paleozoic-age volcanic intrusions or basement highs. In a report to evaluate the hydrocarbon resource potential dated 6 June 2011, Ryder Scott estimated the unrisked prospective (undiscovered recoverable) resources at 935 (Low Estimate), 1,379 (Best Estimate) and 1,980 (High Estimate) million barrels.
In June 2011, the Company commenced drilling Well A-8, the fourth well to be drilled in the Alakol Licence Area. Seismic data indicated that potential Jurassic and Triassic reservoirs were present as stratigraphic traps on the flanks of Paleozoic-age volcanic intrusions or basement highs.
At the end of July 2011, a final depth of 2,019 metres was reached at Well A-8. Well logging data has been evaluated and drill stem testing of prospective intervals has been carried out. Well A-8 was the first well to test the geological model that formed the basis of the Ryder Scott Report and, while it confirmed that reservoir-quality sands are present on the flanks of Paleozoic-age volcanic intrusions or basement highs, no hydrocarbons were found in this well. Consequently, during August 2011, the Company plugged and abandoned Well A-8.
Currently, the Company plans to carry out a 3D seismic program of approximately 500 km² during the second half of 2012 in order to gain a better understanding of the potential reservoirs and stratigraphic traps in the area before drilling further exploration wells.
BUSINESS DEVELOPMENT OPPORTUNITIES
Whilst the Company is focused on exploration at its existing Krasnoleninsky Project and Kazakhstan Project, and at its soon-to-be-acquired Vamarov Project and Druzhny Project, it continues to review other provinces for opportunities to acquire additional exploration and/or production projects.
Thursday, October 27th, 2011
Polarcus Limited has successfully completed the NOK 230 million bond issue (the “Bond Issue”) due November 2014. The bonds will be issued with a coupon of 14.00% p.a., interests to be paid semi-annually, and the net proceeds from the Bond Issue will be used for partly refinancing of the bond for POLARCUS SAMUR and for general corporate purposes.
DnB NOR Markets, Pareto Securities and SEB Merchant Banking have acted as Joint Lead Managers of the Bond Issue.
Wednesday, October 26th, 2011
After the recent economic downturn the industry is rebounding and activity is up. How has the Russian market place improved over the last
12 months, what is your outlook for the rest of this year and 2012?
In 2010, although the physical volume of the market grew by more than 15%, the increased activity did not bring improvement in prices for Oilfield Services. Service companies were pushed for more discounts and increases in prices for some services were only due to the strengthening of the ruble. I believe that the oilfield services market grew by 6% in 2010 and that in the future the key activities influencing production will maintain healthy growth rates in 2011 through 2012. The growth rate will depend upon crude oil prices and many other microeconomic factors.
Russia is now the world’s largest oil producer. Do you see this trend continuing? What key problems would prevent it from being so?
As was demonstrated in 2010, new projects will continue to expand crude oil production in Russia. It is very likely that Russia will reach new highs in the next 5 years. Tax cuts are an important element in stimulating upstream projects and hopefully positive regulations will be accepted incentive for small, green & brown fields development and to start offshore projects.
There has been a recent spate of purchases and joint ventures between Russian service and equipment manufactures and the major international service companies. What do these companies bring to your portfolios and service ranges? Do you see more merger activity in the future?
We haven’t expanded our service portfolio by joint ventures or acquisitions in Russia. What we see as a positive trend in the OFS market is the sale of oilfield assets by producing companies. My opinion is that healthy competition promotes the development of any market and future impact of the spinning off OFS divisions by Exploration and Produсtion companies will be significant for the OFS industry.
How effectively are you competing with the domestic Russian service companies and how do you differentiate yourselves from them, when local content is often a predetermined necessity in field licenses?
The Russian market is very competitive and is somewhat unique in that it has well established local companies as well as our usual international competitors. We differentiate ourselves in the following ways (1) implementation of fit for purpose technologies that improve production and or reduce overall cost of operations (2) highly trained professional personnel (3) equipment reliability (4) our health, safety and environmental commitment and performance
During the down turn the price base of the services you offer was squeezed by the operators as they sought greater value. Have you experience an up lift now that the oil price has increased? If not, how can you try to regain your price value?
Yes. Our margins were squeezed just as other service companies margins were squeezed. However, we look forward to using the momentum generated by the international market growth as well as the opportunities we see in reducing our cost to drive our international margins back up.
As service providers of a range of oilfield solutions, ROGTEC understands that your focus at the moment is to offer the full range of services at the initial point of contact with the operator, instead of having different business units simply bidding in their specific segment area. If this is the case, what advantages does this change in focus bringing?
By expertly integrating the capabilities of multiple product service lines (PSLs), Halliburton can drive out operational inefficiencies and optimize reservoir performance for customers here in Russia. Halliburton has a track record in Russia of delivering large project objectives ahead of schedule by integrating multiple PSL offerings and technological solutions. When an OFS company is involved in all the stages of reservoir development from planning to implementation to managing the asset, the advantages are obvious: reduces operating costs and unlocks hidden potential of the asset.
Russia has recently announced a series of Arctic deals and is clearly pushing to tap its offshore reserves. How are you currently positioned to handle the significant increase in offshore work that will appear over the next few years? What changes will be necessary?
We think we are very well-positioned for the offshore projects. Globally, Halliburton is very experienced in the deepwater offshore market and we are able to leverage that experience for our Russia projects. We are looking forward to the offshore projects to commence in the near term and are currently working with the customer base to share information in deepwater applications. We are also able to leverage our offshore winter conditions experience from the Kashagan offshore project in the North Caspian.
America has recently seen a boom in shale gas production, with hydrofracturing (covered in issue 21) receiving mixed reviews. Do you see Russia developing shale gas in the near future and what potential does hydrofacturing have in the region?
Unlike the US, Russia possesses huge resources of natural gas so we do not see a boom production in shale gas in Russia in the near future. We also think that Russia will continue to increase its exports of natural gas to Europe in spite of the significant amount of shale gas resources. The reservoirs of shale gas in Europe are of good quality, however the infrastructure is not in place and it will take time to build all the required infrastructure to implement shale gas projects.
One operator recently commented in ROGTEC (issue 24) that a 10% increase in drilling costs through the adoption of ERD and sidetracking can lead to 100% increase in production. How receptive are regional operators to EOR and IOR techniques?
We can not speak for the operators, so I recommend that you contact an operator for a response.
What new technology from your product range do you think will have a major impact in the Russian oilfield over the next couple of years?
Rather than relying solely on the latest technologies, we believe the companies need solutions that are specifically designed to address their business issues, so they can make decisions, not compromises. This will enable operators to realize the highest performance of their assets. We think Halliburton Digital Asset® service environment will have a major impact in the market as it’s a real time, collaborative environment to model, measure and optimize the asset. Collaboration across disciplines in the oilfield represents one of our biggest challenges. Simply getting engineering, geology, geophysics, subsurface and other teams working together on the same problem at the right time represents a huge departure from the normal way we do business today. It’s an environment that changes the way our industry works – connecting people, processes and technology so that experts across disciplines can collaborate in real-time and have access to the data they need, when and where they need it.
The key tenet of the Digital Asset environment is a model-based, closed-loop, controlled approach. This relies on creating a model, then taking measurements from executing the model in a real environment, and optimizing the parameters. This approach — using a simple “Model, Measure, and Optimize” paradigm in every phase and facet of our operations– is critical to helping solve the biggest challenges.
The Russian market has made significant progress over that last few years. If you had a “magic wand” what one thing would you change to aid the regions continued improvement and why?
We believe the full cost of well services can only be truly realized when incremental production captured from a service event is modeled to calculate the true rate of return of the expenditure. The magic wand would be a shift from cost per foot analysis to a return on investment analysis.
As a last point of interest to our readers what is your theory on “Peak Oil”?
The Hubbert peak theory appeared in the sixties of the 20th century. As any other theory it has its supporters and opponents. It should be mentioned that the predicted maximum production and further decline at the end of the 20th century and the beginning of the 21st hasn’t been proved. Oil production is increasing. We should not forget about the technologies development and the improvement of the recovery methods. The resources considered in the past as inefficient from the economic point of view are being actively developed. Shallow oil and oil sands are the bright examples. Oil industry is progressing and much time will pass before we approach the peak oil production.
Igor Kotman has been working at the position of a Business Development Manager in “Halliburton” Russia since October 2010. Igor has a big experience in Oil & Gas industry. He graduated from Gubkin Moscow State Academy (now University) in 1994 with a degree of drilling engineer. Igor joined “Halliburton” in 1996 and until 2001 worked in Western Siberia as a Frac\Acid operator. After that he worked in Nizhnevartovsk as a Cementing engineer and then in Noyabrsk as an Account Manager, “Sibneft”. In 2002 Igor was invited to “Halliburton” Moscow location to work first as a Sales Manager and then as a Senior Account Manager, TNK-BP.
Wednesday, October 26th, 2011
TNK-BP announces that Deputy Chairman of TNK-BP Management Board Maxim Barskiy has decided to leave TNK-BP as of 1 November in order to carry on his professional career outside of the Company.
Maxim Barskiy was appointed Deputy Chairman of the Management Board on June 1, 2010 and performed management of the Company through organizing the operations of the Board and coordinating activities of TNK-BP employees.
“Under Maxim Barskiy’s leadership TNK-BP achieved record results in 2010 and continued to grow in 2011. The Company’s effective expansion beyond its traditional markets, namely the successful acquisition of assets in Vietnam and Venezuela and the planned Solimoes project transaction in Brazil, has laid the foundation for TNK-BP’s transformation into an international oil and gas player. These accomplishments were made possible thanks to Maxim’s focused efforts,” said Mikhail Fridman, Executive Chairman of TNK-BP. “These significant achievements driving TNK-BP’s onward development, delivering efficiency growth and enhanced value creation for shareholders going forward.”
“I highly appreciate Maxim’s contribution to TNK-BP’s development and his efforts to increase the value of the Company,” said German Khan, Executive Director of TNK-BP. “I hope we will have the opportunity to collaborate with Maxim on new projects in the near future.”
“I’m grateful to TNK-BP for the unique opportunity to obtain new knowledge and skills through managing one of the world’s leading private oil and gas companies,” said Maxim Barskiy. “Strong leadership, the ability to set ambitious plans and the commitment to deliver on them have always been distinguishing characteristics of TNK-BP. Development of the Company’s strategy and solving day-to-day operational tasks, both in Russia and abroad, have provided me with invaluable experience that I will most certainly use in the future.”
Wednesday, October 26th, 2011
· In the first nine months of 2011, TNK-BP increased its oil and gas extraction, excluding joint ventures 2.1% over the same period in 2010 and 3 September reached a historical peak production in 1824 th. BC / day. Extraction by the share in Slavneft and assets in Venezuela grew by 2.2% to 1969 thousand barrels per day. BC / day in comparison with January-September 2010.
· The company is continuing its insured in the second quarter of 2011, the program efficiency of production in mature fields in Western Siberia. Through the use of new pilot technologies, including restrictions on water production and more efficient water injection, produced water volume decreased by 2.2 million tonnes over the same period in 2010.
· Mining in the Orenburg region in the first nine months grew by 4%, thanks to the success of the company in the exploration of new resources, obtaining licenses and effective integration of resources in production. Thus, for the first nine months of 2011, the Company acquired on federal auctions 4 licenses in Orenburg region, increasing the resources of 158 million barrels. BC
· New projects Uvat group and Verkhnechonsk, continued to increase production, while their share in total liquids production reached 13%.
· The company has continued to increase implementation of the gas, both natural and associated, in accordance with the adopted strategy, providing a substantial increase in the gas business and increase its share of EBITDA and mining companies to more than 20% by 2020. Mining Rospan grew by 24% over the same period last year, and implementation of associated gas increased by 8 percent. The company has advanced in the preparation of a full scale Rospan and working opportunities to further increase the utilization of associated petroleum gas. In particular, the company is preparing the launch of a new compressor station with capacity of 0.7 billion cubic meters at the Nizhnevartovsk gas processing plant in the fourth quarter of 2011, as well as exploring the possibilities of increasing the capacity of the Orenburg gas processing region.
• In the electricity sector, we completed an important stage in the construction of 3rd Block Nizhnevartovsk Power Plant, bringing GE gas turbine 400 MW in Russia.
· The volume of oil processing totaled 763 thousand barrels / day., Up 7% over the same period of 2010. This achievement was a result of the successful continuation of measures to address the technological limitations. Tolling operations in the Ukrainian oil refineries LINIK grew by 82%, which allowed the Ukrainian business to get $ 17 million net profit for the nine months of 2011 compared to a net loss for the same period in 2010.
· The company continued its efforts to expand the premium retail chain, increasing the number of stations under the brand BP in Russia and 97 at the end of the third quarter. The company also continued to develop TNK brand by launching a loyalty program Carbon.
· As part of the International Business Development Company completed the acquisition from BP Block 01/06 in Vietnam and will focus on the integration of assets in Vietnam and Venezuela in the business structure of TNK-BP and the maintenance of high operational and financial performance of these assets.
“For the first nine months of 2011, TNK-BP reached a record financial performance, due to favorable market conditions, high standards of production and efficiency, – said the chief financial officer of TNK-BP Jonathan Muir. – Net income rose 75% to 6.8 billion dollars, which was an absolute record in company history. Compared to the same period last year, EBITDA increased by 52% and reached 11.0 billion dollars, helped by growth in production and processing, partially offset the negative impact of exchange rates, and also increased tariffs and excise taxes.
Company’s business continued to grow, due to both organic development and acquisitions: the new projects, Uvat group and Verkhnechonsk, went to new levels of production, and foreign assets made the first contribution to the results of TNK-BP.
The company strictly observed fiscal discipline, setting a new benchmark for the cost of borrowing and saving ratio of debt to equity at 21%. The continued positive trend in all areas of operations of the Company gives every reason for confidence that 2011 could become the most successful year in the history of TNK-BP. ”
FINANCIAL HIGHLIGHTS FOR THE NINE MONTHS OF 2011
· Revenue for the nine months of 2011 increased by 38% over the same period last year, reflecting higher prices and increased production Urals, and was partially offset by the redistribution of volumes on the domestic market in order to obtain higher netbacks,
· Export duties and taxes except income tax for the first nine months of 2011 increased by 41% over the same period in 2010. This is due to the influence of the growth rates of Urals export duty and tax on the extraction of minerals, as well as increased excise rates on petroleum products, which were partially offset by a significant positive effect of time lag in export duties.
· Cash costs (operating, transportation, commercial and administrative expenses) increased by 19%, mainly due to growth rates, inflation and the effect of the ruble, as well as an increase in valuation allowances.
· The EBITDA for the nine months of 2011 amounted to 11.0 billion dollars, which is 52% higher than in 2010. This is due mainly to higher prices, the positive effect of lag on export duty and increase in the volume of production and processing. Positive growth factors, the EBITDA was partially offset by negative exchange rate impact, as well as increased tariffs and excise taxes.
· Net profit for the nine months of 2011 totaled $ 6.8 billion, a 75% increase over the same period in 2010. Earnings growth has exceeded the growth rate of EBITDA, mainly due to the relatively stable level of expenses for depreciation.
· Cash flow from operating activities for the nine months of 2011 totaled 8.0 billion dollars, up 15% more than in 2010. This reflects a growth rate EBITDA (adjusted for non-operating income and expenses), partially offset by an increase in working capital, mainly due to the impact of rising prices at the level of receivables and credit extension number of periods in order to obtain higher netbacks.
· Due to the growth of profit and shareholders’ equity ratio of debt to equity was maintained at 21%, despite an increase in net debt by 0.4 billion dollars.
· The amount of organic capital expenditure for the nine months of 2011 totaled $ 3.5 billion, up 27% more than in 2010. Growth capital expenditures primarily related to increased investment in promising new fields (Verkhnechonskoye, Uvat group) and projects in the Orenburg region, as well as in oil refineries in the Saratov and Ryazan.
FIGURES III HF. 2011
· Revenues for the third quarter of 2011 decreased by 1% compared with that for the second quarter, reflecting mainly lower oil prices.
· Export duties and other taxes increased by 5% compared with the previous quarter due to rising oil exports and the relative decrease in the effect of time lag in export duty, which was partially offset by lower oil prices Urals.
· Cash costs (operating, transportation, commercial and administrative expenses) in the third quarter remained at the level of the second quarter, as growth rates and inflation, together with the seasonal increase in volumes of downhole operations, the volume of contracting and other activities were offset by the weakening ruble.
· The EBITDA for the third quarter of 2011 increased by 3% compared with that for the second quarter. This was due mainly to the positive influence of the weakening ruble, increasing production and disposable income, which were partially offset by deteriorating market conditions and the effect of decreasing the time lag in export duties.
· Net profit for the third quarter of 2011 increased by 8%, exceeding the dynamics of the EBITDA, mainly due to exchange gains in the third quarter compared to a loss in the second.
· Cash flow from operating activities in the third quarter fell by 44% compared with the figures for the second quarter, mainly due to an increase in working capital. The increase in working capital was primarily due to an increase in the managed payment terms of receivables, as well as with lower levels of accounts payable due to the depreciation of the ruble at the end of the third quarter.
· The volume of organic capital expenditure in the third quarter of $ 1.3 billion, remaining at the level of the second quarter.
· In comparison with the analogous results for the third quarter of 2010, EBITDA and net profit for the third quarter of 2011 increased 40% and 57% respectively. The main reason was the improvement in market conditions – rising prices for Urals oil at 48%, and increased production by 3.9%. These positive factors were partially offset by lower sales volumes due to the formation of inventories in the third quarter of 2011 compared to the substantial sales of inventory in the third quarter of 2010, a relatively low time lag in export duties, as well as the influence of the ruble and inflation costs.
The information presented in this press release financial information relates to the company “TNK-BP International Ltd..” (TNK-BP International Ltd.).